Laws pertaining to cryptocurrency differ from country to country. Almost every country has different laws when it comes to crypto holdings and trading. The same is the case with Japan; according to Bloomberg, the country’s crypto market is worth nearly $1 trillion and is among the biggest crypto markets in the world.
The crypto landscape in Japan is termed as one of the most progressive in the world. The country governs cryptocurrencies on a couple of laws passed that entail the process of the exchange of cryptocurrencies. The country recognizes Bitcoin and other forms of cryptocurrencies as legal property under the Payment Services Act that was passed in 2009 and amended in 2020 to incorporate the changes that the global financial system has gone through.
The Payment Services Act allows for the trading of bitcoin by Japanese residents; it facilitates the transfer of coins by recognizing them as the rightful possessions of its citizens. The cryptocurrencies in Japan are regulated under two particular sets of laws; the first being the PSA and the second being The Financial Instruments and Exchange Act (FIEA). These acts are discussed in detail below.
The Financial Instruments and Exchange Act (FIEA)
The act was passed in 1948 and is designed to specifically regulate securities within Japan. It deals with everything related to securities exchange and the financial institutions that deal with the trading of these securities. There is no direct mention of virtual currencies in the act; however, all the virtual currencies that are regarded as securities fall under this law and are dealt with as entailed by the FIEA.
Initial Coin Offerings or ICOs fall directly under FIEA because, as per the latest amendment to the act, ICOs are characterized as type 2 securities. The term type 2 securities is used to refer to anything that represents interests in a collective investment scheme. The reason ICOs fall under this category is that they are subject to collective investment. Bonds and stocks are termed type 1 securities because they are readily available to the public. Bonds and poocoin stock are termed type 1 securities because they are readily available to the public.
Because they fall under the category of type 2 securities, ICOs are bound by a lesser number of regulations than bonds and stocks.
The Payment Services Act (PSA)
Passed in 2009 and implemented in 2012, The Payment Services Act (PSA) works to protect the interest of investors. As per the act, it is compulsory for financial payment services to get registered within the country. In 2020, the act was amended to incorporate cryptocurrencies and crypto-related exchanges within its framework.
Under the law, companies dealing with crypto exchanges are required to register with the Japan Financial Services Agency (JFSA). Furthermore, the term crypto-assets applies to any virtual property that is stored on an electronic device and can be transferred digitally.
The reason for these amendments to the PSA was to safeguard the interests of investors who choose to put their money in the crypto market. It also works to regulate the crypto market more efficiently and make crypto exchanges more transparent. These amendments not only make the Japanese economy more crypto-friendly but also make crypto trading safer for Japanese citizens, encouraging the use of bitcoin and other cryptocurrencies in everyday transactions.